The American Central Bank wants to curb inflation, revived by the war. Furthermore, the lockdowns in China have “exacerbated the problems”.
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The US Central Bank (Fed), “strongly determined to bring inflation back to its 2% target”, raised its key rates by three-quarters of a percentage point on Wednesday, June 15, the largest increase since 1994, in an attempt to control stronger than expected inflation. With this third increase in a row, these rates are now in a range between 1.5 and 1.75%.
The Fed also announced that it expects inflation to be 5.2% this year, compared to 4.3% projected in March, and will therefore make further hikes at its next meetings in 2022. At the same time, it anticipates a weaker-than-expected economic growth in the United States this year, at 1.7%, compared to 2.8% previously. She also expects the unemployment rate to be higher than expected at 3.7%, compared to 3.5% previously.
The war in Ukraine and China responsible
“General economic activity has rebounded,” after contracting in the first quarter, the Fed noted in a statement after its meeting, citing “robust job gains in recent months and a unemployment rate remaining at a low level. But inflation remains “high, reflecting pandemic-related supply and demand imbalances, higher energy prices and broader pricing pressures”, she added. p>
The institution recalls that the invasion in Ukraine and the sanctions have created “additional upward pressure on inflation and weigh on global economic activity”. Additionally, the lockdowns in China have exacerbated supply chain issues. All of this is slowing down the US economy. “The committee is highly attentive to inflation risks,” the Fed said.
